Fixed Rate Hybrid Mortgages
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A fixed rate hybrid mortgage is a mortgage that starts with an initial period where the interest rate and monthly payment are fixed, followed by the remainder of the loan which the rate and payment may fluctuate with the market.The types and initial fixed period vary depending on which program you choose.
Most home owners with Fixed Rate Hybrid Mortgages do not hold the loan beyond the fixed rate period. Many intend to either sell their houses or refinance before the interest rates on their loans become adjustable. This is due to the fact that in most cases once the interest rates become adjustable, the fully indexed rate of their hybrid mortgages are often much higher than the initial fixed rates.
Fixed rate hybrid mortgages have been a very popular loan for the past few years due to their low rates for the their initial fixed periods. However, as the mortgage rates have went up over the past few years, now there is less of a gap difference between the fixed rate hybrid mortgages and the "normal" 30 year fixed rate mortgage. Therefore, may consumers are selecting a 30 year fixed rate mortgage right now and many of the consumers who were in these fixed rate hybrids are selecting to refinance their mortgages into a more stable and traditional 30 year fixed rate loan.
These types of ARMs can save you a lot in interest in the early years and help you to pay down some additional equity. The most common ARMs are 3/1, 5/1, 7/1 and 10/1. People who plan to relocate or will be moving to a larger home in a few years should seriously consider these hybrid ARMs.
Many Hybrid mortgages are scheduled to become adjustable rate mortgages in 2007 and 2008. If your Hybrid mortgage is adjusting, refinancing is one of the best ways to lock in a fixed rate for another 3, 5, 7, 10 or even 30 years.